Return on equity drifts down over time on a Dubai property, and most owners don’t notice until they wonder why the “great investment” isn’t compounding like it used to.
Return on equity is annual net income divided by current equity — current market value minus outstanding mortgage. It’s different from return on cash (which uses the original cash invested) because equity grows with appreciation and principal repayment. A unit that delivered 9% ROC at purchase might be delivering only 5% ROE four years later — same cash flow, but against a larger equity base.
On an AED 1.5M unit bought in 2020 with AED 400k equity deployed, generating AED 45k/year net, the original ROC was 11.3%. Four years later, with the unit now worth AED 1.95M and the mortgage paid down to AED 950k, equity sits around AED 1M. Same AED 45k of annual income. ROE: 4.5%. Against Treasury at 4.5%, the case for holding gets marginal.
The ROE-drift signal is when most long-hold Dubai owners should seriously consider refinancing to redeploy equity or selling to rotate capital into higher-yield positions.
A client last year refinanced a Dubai Marina unit he’d held eight years. Released AED 550k of equity into two JVC studios at 8.2% ROC.
Watch ROE. It’s the signal to rotate.
Related: ROC, ROI, Equity, Capital Appreciation.
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